Thanks Teevee., Fix., and Steve: Thought this might be of interest
from Dr. Rhombouts
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To: zoli bognar (971 )
From: George J. Tromp Sunday, Nov 8 1998 9:48PM ET
Reply # of 972
For those interested:
An overview of current diamond mining and exploration
Introduction
At retail level, the diamond jewellery sales worldwide in 1997 were estimated at 67.1 million pieces, worth US$ 49.4 billion. This was slightly down from US$ 51.5 billion in 1996. The reduction in sales is modest, compared to the pessimistic expectations as a consequence of the sharp downturn in the economies of East Asia, the fastest growing diamond market before the crisis erupted. Sales were indeed down in East Asia by 18%, but this decrease was largely compensated by increased sales in especially North America, the United Kingdom and to a lesser extent continental Europe and the rest of the world. The value content of the polished diamonds in the jewellery pieces was estimated at US$ 11.7 billion. The value of the rough diamond mine production was estimated at close to US$ 7 billion in 1997, similar to 1996, with the Central Selling Organisation supplying 66% or US$ 4.6 billion.
Because of the long transit times of diamonds in the pipeline from mine to retailer, the market prices of the rough diamonds are not always reacting in tandem with those of the polished diamonds. The past few years had seen softer polished prices and strong prices for good quality rough diamonds. This squeezed the diamond manufacturers and traders with stocks piling up in the diamond trading centres such as Belgium, Israel and India. The Central Selling Organisation reacted to this treat by sharply reducing sales in the first half of 1998, down to US$ 1.5 billion, compared to US$ 2.3 billion in the first six months of 1997, and by vigorously continuing its worldwide advertising campaign.
Mine supply
Botswana and Russia had been competing over the past few years for the position of the world's leading diamond producer. In 1997, Botswana has emerged as a clear winner, by increasing its production to more than 20 million carats, worth an estimated US$ 1.65 billion. The increase in production was mainly achieved by introducing a seven-day workweek. Jwaneng, a low-cost open pit mine, remains the world's richest diamond mine, producing 12.5 million carats, worth more than US$ 1 billion, with an average value content of the ore of US$ 111 per tonne. Botswana's second largest mine, Orapa, produced 6.7 million carats in 1997 and is still on target to increase its production by the year 2000 to 12 million carats. In contrast, Russia had difficulty to keep up production levels at its largest mine, Udachny, where the pit is now deeper than 400 m. The undisciplined sales from the diamond stockpile in Moscow have dried up now, and Almazy Rossii Sakha (Alrosa) has signed on 1st December 1997 a 13 month sales agreement with the CSO. At least 40% of Alrosa's production, or US$ 550 million of diamonds per year, are going to be marketed through the CSO.
South Africa is the world's third largest diamond producer in value. About 10 million carats, worth just under US$ 1 billion were produced in 1997, with De Beers the most important producer. Production at most of the De Beers mines was slightly up compared to 1996, with only Koffiefontein and Premier recovering less carats.
The world's largest diamond mine in volume terms, Argyle in Australia, had difficulty receiving satisfactory prices for its diamonds in 1997, its first year outside the CSO umbrella. Production levels remained high however, with more than 40 million carats produced, worth an estimated US$ 322 million. Argyle is 60% owned by Rio Tinto and 40% by Ashton Mining. Argyle managed to improve its sales in the first half of 1998, with prices increasing by up to 15%.
Namibia's production is derived from present-day and older beach deposits, which occur both on land and under the sea. The land-based production was on a declining trend in the past few years, but this was compensated by increased production from the sea. Namibia's major diamond producer is Namdeb, a 50/50 joint venture between the government of Namibia and De Beers. The decrease of land production has been temporarily halted now by the installation of a 2500 tonnes/hour dredge by Namdeb at the cost of US$ 40 million. The dredge allows the sea to be pushed back by 300 m. The dredge and the offshore vessels of De Beers Marine should enable Namdeb to keep production for the next ten years at the present rate of 1.3 million carats per year, worth US$ 370 million. Offshore, De Beers Marine produced 481,000 carats in 1997, while Ocean Diamond Mining aims for 60,000 carats and Namco for 150,000 carats in 1998. More to the south, the Moonstar vessel, operated by Benguela Concessions of South Africa, has started trial mining in South African waters at a planned rate of 65,000 carats per year.
In the Angola and the D.R. of Congo, most diamonds are produced by artisans from alluvial sources. Both countries produce diamonds worth US$ 800 to 900 million in 1997. In Congo, MIBA is the only industrial-scale operation. MIBA has managed in the past few years to hold its ground in a very difficult logistical environment and production is now slightly up again at 6.8 million carats. The MIBA diamonds are mainly of industrial quality, worth US$ 75 million. Their production used to be sold through the CSO, but since the installation of the Kabila administration, the MIBA diamonds are sold by tender. In Angola, at the end of 1997 production started on the Catoca kimberlite crater, by the joint venture partners Alrosa of Russia, Odebrecht of Brazil, the Angolan state enterprise Endiama and the Israeli traders LID. Plans are to increase production rates steadily from 600,000 to 1,600,000 tonnes over 9 years, yielding a respective increase in diamond production from 235,000 to 940,000 carats per year. DiamondWorks has started production at two alluvial mines in Angola, Luo and Yetwene. Production rates in Luo should be 65,000 carats per year and 100,000 carats in Yetwene.
Apart from the major diamond operations in Botswana, Russia, South Africa, Congo, Angola, Namibia and Australia, diamond mining activities elsewhere are modest. In Zimbabwe, the River Ranch mine produced 464,000 carats, worth US$ 17 million and closed at the beginning of 1998. In the Central African Republic, Trans Hex and United Reef closed the small Bamingui mine. In the West African countries, Guinea, Sierra Leone, Liberia, Ivory Coast and Ghana, production is almost exclusively from artisanal sources. De Beers produced 116,750 carats, worth about US$ 145 per carat, at the Williamson mine in Tanzania. In South America, a large part of the diamond production is from small dredges working on the major rivers draining the Roraima plateau, covering northern Brazil, eastern Venezuela and western Guyana. More to the south, the Juina area in Mato Grosso is, however, Brazil's most important diamond producing region, but stones are mainly of poor quality.
New mine developments
Canada's first diamond mine, Ekati in the North West Territories, is starting this month production at the rate of 9,000 tonnes per day from the Panda kimberlite. Initially, 3.5 million carats per year are going to be produced, worth US$ 130 per carat. In value, the Ekati production represents about 5% of the world's diamond mine supply. The Ekati project is a joint venture between BHP (51%), Dia Met (29%), Charles Fipke (0%) and Stuart Blossom (10%). By the year 2002, Canada's second diamond mine, Diavik, located just to the south of the Ekati lease, may come on stream. Diavik is a joint venture between Rio Tinto (60%) and Aber Resources (40%). Grades of the Diavik kimberlites are high. Resources in the 4 Diavik pipes down to 415 m depth are estimated at 37.3 million tonnes, grading 1.9 to 4.6 carats/tonne with diamond values averaging at around US$ 60/carat. The Diavik prefeasibility study envisages a 2 million tonnes per year operation, yielding 6 to 8 million carats, worth about US$ 400 million. The capital costs are estimated at US$ 1.3 billion. If Diavik gets going, Canada would be producing about 8% of the world's diamond supply in value.
In Russia's Sakha Republic, Alrosa is planning a US$ 200 million investment to develop underground mines on the International, Mirny and Aykhal kimberlite pipes, were open pit reserves are exhausted. In the longer term, Alrosa may need US$ 2 billion to develop the newly found Nyurbinskaya kimberlite in the Markha valley. In the present financial climate of Russia, Alrosa may find it hard to realize its plans. In February 1998 its US$ 350 million eurobond issue had to be withdrawn.
The Lomonosov project north of Arkhangelsk is being developed by the Russian enterprise Severalmaz. De Beers has taken a position in Severalmaz and is now believed to have close to 50%. The other major shareholder in Severalmaz is the Russian company Soglasiye. Alrosa, presently only owning and operating the large diamond mines in the Sakha republic, has shown a keen interest in the Lomonosov project as well and is expected to increase its involvement. The nearby Verkhotina project with the rich Vladimir Grib pipe (previously known as Pipe 441) is being developed by the joint venture partners Archangel Diamond Corporation of Canada and the regional Geological Survey company, Arkgeo. The title holder on the Grib pipe is Arkgeo and according to the joint venture agreement, the title should be transfered to Almazy Bereg in which Archangel Diamond Corporation has a 40% interest. The transfer of title from Arkgeo to Almazy Bereg does not seem a smooth process, as Archangel Diamond Corporation has filed for international arbitration proceedings to start in Stockholm. Task Holdings, an investment company controled by the Oppenheimer family, has taken a strong position (believed to be 41%) in Archangel Diamond Corporation. Apart from the title problems at the Verkhotina project, the main technical difficulty for both the Lomonosov and Verkhotina projects resides in the thick (60 m) water-logged overburden.
The Argyle mine is reaching within a few years the economic limits of its open pit operation. With underground development still undecided, the Argyle joint venture partners can expect to be looking for alternative diamond sources. Rio Tinto has the Diavik project in north Canada, while Ashton Mining is developing the Merlin kimberlite project in Australia, the Cempaka alluvial dredging project in Indonesia and the Cuango alluvial mining operation in Angola. The Merlin kimberlite are located in the Northern Territory. In a first phase, trial mining will be started on a cluster of nine pipes at the rate of 710,000 tonnes per annum. Grades in the four richest pipes range from 0.3 to 0.7 carats/tonne with diamonds worth US$ 47 to 140/carat. If results are encouraging, the cluster of pipes could be developed into a medium-scale diamond mine. The Cempaka alluvial diamond deposits are located on the island of Borneo. The diamond-bearing deposits cover two merging buried channels, known as the Danau Seran and Cempaka paleochannels. A bulk sample of 9,000 tonnes yielded 1,323 carats, worth US$ 200/carat. Initially, Ashton plans to mine the Danau Seran paleochannel with a bucketline dredge with an annual capacity of 2.5 million cubic metres and fitted with a modular 120 tonnes/hour heavy media separator. If results are encouraging, the operation will be upgraded to a 5.5 million cubic metres per annum. Initial production is estimated at 35,000 carats/year, increasing at a later stage to 75,000 carats/year. Production is expected to start in the first half of 1999. Ashton plans as well to develop the Cuango alluvial deposits in Angola in joint venture with Odebrecht and Endiama. Before the outbreak of the war with Unita, the Luzamba and Cafunfo operations along the Cuango used to be Angola's most important diamond mines, producing 80,000 carats per month.
Some legal and political turmoil has surrounded the Marsfontein kimberlite property in South Africa. The Marsfontein M-1 kimberlite pipe was the jewel in the crown of Southern Era's Klipspringer project. Southern Era is developing the Klipspringer property into a 400,000 tonnes per year mining operation. The Klipspringer deposit is made up of two kimberlite dykes, Sugarbird and Leopard, and a number of blows and pipes, of which M-1 is the richest. The mining title of Marsfontein, believed to be held by Southern Era and Randgold was challenged by private individuals, who came to an agreement with De Beers. Southern Era's torn hereupon turned against De Beers, but after a few weeks an amicable solution was found. De Beers now owns 60% of the M-1 pipe, while the Southern Era – Randgold JV was holding 40%. Southern Era has recently exercised its option to purchase the Randgold interest in the Marsfontein project and has now a full 40% interest. In the mean time, Southern Era has started in February 1998 production on its 100% held Sugarbird blow, with about 70,000 carats produced in the first 5 months. The Klipspringer diamonds average US$ 112/carat in value. On August 31, production stated on the Marsfontein property, with 68,000 carats produced in the first 6 days of operation from close to 8,000 tonne of loose weathered material overlying the M1 kimberlite blow.
In Botswana, Debswana, the joint venture between De Beers and the Botswana government, has started trial mining on five small kimberlites at Martin's Drift. The Liqhobong project in the mountains of north Lesotho is in its final feasibility stage. Bulk sampling by Messina Diamond Corporation revealed a grade for the Main pipe that was not entirely convincing, but mining costs are expected to be low.
The unfortunate political events in Sierra Leone during 1997 have taken the steam out of the plans of DiamondWorks and Rex to develop resp. the Koidu and Tongo kimberlites into modest, but high grade, underground mining operations. The mining title of both companies have been confirmed by the new administration.
Exploration
Thanks to the spectacular successes of the Ekati and Diavik projects, Canada continues on attracting most diamond exploration dollars. The BHP – Dia Met joint venture has presently the Panda, Koala, Misery, Sable, Fox and Leslie kimberlites in its mine schedule for the next 15 years. Exploration within a 30 km radius of the Ekati plant has resulted in several more kimberlite discoveries. The two latest discoveries are the Koala North and Beartooth kimberlite. Koala North is located just north of the Koala pipe underneath the same lake, while Beartooth is 900 m north of Panda. The Koala North pipe has a surface area of 0.6 hectares and a grade of 0.63 carats/tonne, while Beartooth measures 1 hectare and has a grade of 1.2 carats/tonne. Given the location of the pipes close to the Ekati treatment plant, it seems likely that both pipes will enter in the reserve schedule for the Ekati mine. Elsewhere in the North West Territories, Mountain Province in joint venture with De Beers has obtained encouraging results at its Kennedy Lake property, where a cluster of small but high grade kimberlite bodies have been found. The pipes are Tuzo, Tesla, Hearne and 5034. Recently, sampling of the Tuzo pipe revealed a grade of 2.24 carats/tonne of plus 1 mm stones. Elsewhere on the Slave craton, Lytton and New Indigo have taken bulk samples from the Jericho kimberlite bodies, recovering 10,539 carats from 9,401 tonnes of kimberlite at a grade of 1.18 carats/tonne. The diamonds have been valued at US$60/carat. Winspear has found high grade kimberlite dykes at Snap Lake, while the drill results of the recently discovered Buffalo Hills kimberlites by Ashton in Alberta are not entirely convincing.
In South America, diamond exploration is mainly focused on Brazil. Canabrava and Teck are exploring the classical diamond-producing area of Minas Gerais, east of Coromandel. Rio Tinto, De Beers and Diagem of Canada are exploring the Juina alluvial deposits and kimberlites. Unfortunately, diamonds tend to be of poor quality, but artisanal miners have sporadically found some larger good quality stones. Diagem and De Beers are targeting the Chapadao region, believed to be the source area for most of the alluvial diamonds west of Juina town.
In southern Africa, Rio Tinto is finding kimberlites in Zimbabwe, while AfriOre, Falconbridge, BHP, Ashton and De Beers continue their efforts in Botswana. In Angola, De Beers has found more kimberlites near Catoca, while DiamondWorks is going to test the Camatchio and Camagico pipes and Southern Era the Camafuca pipe. These Angolan pipes are very large (several tens of hectares) but low grade (usually less than 0.15 carats/tonne).
In West Africa, Golden Star is having a second look at the Tortiya alluvial deposits in the Ivory Coast and is searching for the primary sources of the diamonds. In Guinea, where Aredor produced in the 1980's some very large top quality stones, De Beers keeps on exploring for larger kimberlites, while Trivalence of Canada is trying to restart on a modest scale Aredor's former alluvial operations. In the south of the country, Hymex of Canada battles to make a living out of the Diani and Avili deposits. Mink of Canada, in joint venture with Ashton, is finding large kimberlite craters in the Kéniéba region of west Mali, but so far diamond grades are low. Large scale grass-roots exploration is carried out by Ashton and Rex in northern Mauritania. Rex flew 100,000 line kilometres of magnetic surveys and is following up anomalies. Pyrope garnets, with kimberlitic compositions, are widespread in the desert of northern Mauritania, and recently diamonds and kimberlite rocks have been found. Mauritania is already being labelled a potential Botswana by the ever-optimistic diamond explorers. |
